‘Legal responsibility of a corporation for criminal actions of its employees’
A corporation is a body that exists only by its employees. It can be held liable for the criminal acts of its employees only until the employees are acting within the scope of their employment and their conduct is for the interest of the corporation. Corporations must perform certain functions under the law. Failure to perform those functions can lead to criminal liability. There are certain basics that constitute corporate criminal liability test in general:
(1) The employee should have an intention to benefit the corporation
(2) Or the employee acts for his personal gain but as a result, the corporation ends up benefiting from the acts.
However, the profit of the corporation necessarily does not have to be the sole reason behind the actions of the employee.
Corporate Criminal Liability – The Necessity:
In everyday activities, the corporations not only affect the lives of the individuals but also perform disastrous acts that constitute a crime. Despite so many disasters, the law was relentless to impose criminal liability upon corporations for a very long time. The reasons being:
- Corporations cannot have the mens rea (guilty mind) to commit a crime
- Corporations cannot be imprisoned.
Circumstances for imposing criminal liability
- Disregard in obeying decrees and other court orders
- Bribery
- Conspiracy to bribe officials
- Illegal medicinal practices
- Creating public nuisance
- Violations of licensing and regulatory statutes
- Violation of consumer protection laws
- Antitrust law violations
Scope of employment
The employee must have an actual or apparent authority to act within the scope of his or her employment to get involved in a specific act. Apparent authority is when he or she indulges in an act that a third party could rationally believe he or she is the authority who is supposed to perform. Actual authority is when a corporation intentionally assigns to an employee, the authority. Generally, if a reasonable relationship can be shown between an employee’s criminal act and his or her corporate functions, there are chances of the corporation being held criminally liable for the employee’s conduct.
Punishments imposed
A corporation cannot be confined or punished like individuals but there exists techniques to punish a corporation like
- Heavy penalties
- Loss of business license(s)
- Regulation by government agencies
- Loss of government contracts
- Shareholder suits
- Permanent or temporary loss of deposit insurance, conservatorship, and receivership.
- Revocation of corporate charter by state authorities
Assessing Theories of Corporate Criminal Liability
The majority of corporate criminal liability theories are based on common law been constructed on the basis of cases.
- Accomplice liability theory: When a corporation is held criminally liable, the responsibility falls on individuals too. If an individual is found to have aided, encouraged, assisted, or instructed other employee to commit a criminal act, they are held liable for the employee’s criminal act.
- Agency Theory: under this theory, the corporation is liable for the intentions and acts of employees. It is based on the assumption that criminal violations normally require two elements- actus reus(wrongful act) and mens rea(guilty mind).
- Identification Theory: it is based on the principle of detection of the guilty mind i.e. the identification of the individual who will be recognised as the company, who will be the company’s key mind.
- Aggregation Theory: under this, the combined fault of various individual faults, each of which lacks the required mens rea, is charged to the corporation.
Corporate Criminal Liability In India
Criminal Liability is put only on those acts in which there is a violation of Criminal Law which prohibits certain acts or omissions. The basic rule of criminal liability is expressed in Latin maxim actus non facit reum, nisi mens sit rea. It implies that a wrongful act can only constitute crime, if done with guilty mind. Although this principle is applicable to all cases of criminal nature but the criminal law jurisprudence has mentioned an exception to it in form of doctrine of strict liability in which the presence of guilty mind is not responsible to constitute a crime, for example, in cases of mass destructions through pollution like grave negligence of the company leading to widespread damages (Bhopal Gas tragedy).
Statutes in this respect are-
- Section 141 of negotiable instruments act 1862
- Section 7 essential commodities act
- Section 276-B of income tax act